Rising Fuel Prices Are Impacting Small Business Bottom Lines

While statistics show that economic recovery continues to take hold, rising fuel prices are increasingly squeezing small businesses across the United States.

The Bureau of Labor Statistics says that the private sector added 222,000 jobs in February, nudging the unemployment rate down to 8.9 percent. More jobs should mean more disposable income. While this should be welcome news to small firms everywhere, business owners are casting a wary eye, as crude oil prices continue to spike.

How rising fuel prices hurt small businesses

Higher crude oil prices translate into higher gas costs for consumers and higher overall costs for businesses. When consumers are forced to spend more of their paychecks on gas for their vehicles, they have less disposable income to pump into the local economy, hurting small businesses.

Rising fuel prices also have a negative impact on business bottom lines by driving up both manufacturing and transportation costs. Millions of products people use everyday incorporate some form of oil in the manufacturing process. Petrochemicals are not only used to produce bottles, bags and packaging, but it is also used for food products, sodas, formulations, personal care products, clothing, and more.

But for many small businesses, probably the most notable impact of rising fuel prices is felt in higher transportation expenses. The spiraling costs of transporting goods from one point to another are shrinking already slim profit margins and pushing many small business owners to raise their prices. In today's economy, with many consumers still reeling from the recession, higher prices can have a devastating impact on sales.

Rising fuel prices have essentially put many small business owners between a rock and a hard place, forcing them to make a difficult decision. They can raise prices and risk driving away their customers or do nothing and watch their already tight profit margins get squeezed even further, hoping that the spike in the price of crude oil is only temporary.

In any case, while the economists and politicians may be glowing about the slow but steady improvement in the economic outlook, millions of small businesses have a long road ahead of them, before they can breathe a sigh of relief.